High cost of education

ESSENTIAL AS INFLATION PUSHES UP COSTS EVERY YEAR Parents need to factor in extras like uniforms, text books, stationery.

The cost of educating a child should be the number one concern for parents in South Africa. This is especially true when one factors in sharp increases in education inflation, with the figure for 2017 expected to be higher than 6%.

“Alarmingly, education inflation is higher than South Africa’s consumer price index (CPI) and this gap has widened from around 2% in the early 2000s to a probable 6% in 2017,” said Old Mutual’s head of financial education, John Manyike.

“This means that a parent whose child started Grade R in 2017 can expect to pay between R1 332 112 and R2 980 373 for public or private education, respectively.

“This rand amount includes primary school, high school and a three-year university qualification,”

Manyike also noted that parents were not saving enough to be able to provide for their children’s education and the related inflation of these costs.

He referenced the 2016 Old Mutual Savings and Investment Monitor, which revealed that 54% of urban South African parents were still not actively saving for their children’s education.

“Saving for education is like saving for your retirement. You wouldn’t start a year or two before you need to retire. So the best course of action is to start saving as early as possible.

“Even if you can only afford a small amount to begin with, the important thing is to start.

“There are a number of educational policies or savings instruments in the market and you should ask your financial adviser to assist you with a financial plan.”

Manyike said parents should consider a number of additional costs beyond just the fees of educational institutions.

“You also need to factor in the costs of school uniforms, text books, stationery, transport, food, extra lessons, extra-mural activities, pocket money and accommodation when planning for your child’s education.”

Manyike encouraged parents to consult financial advisers to explore savings instruments that offer inflation-beating capability, the flexibility of a lump sum contribution or scheduled contributions. Parents should also be aware of the corresponding risks associated with investing.

Parents should deal with an accredited financial adviser and a reputable financial institution. – Citizen reporter